Valores Mundiales, S.L. and Consorcio Andino S.L. v. Bolivarian Republic of Venezuela
ICSID · Investment (ICSID and treaty) · Venezuela · 25 Jul 2017
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard in the context of a series of regulatory measures that cumulatively breached the standard, even though no expropriation was found. It also addressed complex jurisdictional issues arising from Venezuela's denunciation of the ICSID Convention, and set a precedent for the valuation of damages in cases where the investment's value was not reduced to zero.
Summary
The case concerns two Spanish companies, Valores Mundiales, S.L. and Consorcio Andino, S.L., which held shares in Venezuelan food processing companies Monaca and Demaseca. The claimants alleged that Venezuela, through a series of measures including Decree No. 7.394 (which imposed price controls and other regulations), special administrative measures, and exchange control restrictions, violated the Spain-Venezuela Bilateral Investment Treaty (BIT). The Tribunal had to first address four jurisdictional objections raised by Venezuela, including the effect of Venezuela's denunciation of the ICSID Convention. The Tribunal rejected all objections, finding it had jurisdiction. On the merits, the Tribunal found that Venezuela had not expropriated the investments, as the claimants retained ownership and control, and the measures did not permanently deprive them of the value. However, the Tribunal found that Venezuela breached the fair and equitable treatment standard by creating a regulatory environment that was unpredictable and inconsistent, and by failing to provide a stable legal framework. It also found that Venezuela imposed arbitrary measures that hindered the management and development of the investments, and restricted the free transfer of funds. The Tribunal awarded damages of US$430.4 million, calculated as the difference between the actual value of the investments at the valuation date (21 January 2013) and the value they would have had in the absence of the breaches. The award included compound interest at LIBOR + 2% from 22 January 2013 until payment. The Tribunal also ordered Venezuela to pay 60% of the claimants' legal costs and arbitration costs.
The detail
Parties: Valores Mundiales, S.L. and Consorcio Andino S.L. v. Bolivarian Republic of Venezuela
Case number: ICSID Case No. ARB/13/11
Outcome: The Tribunal found Venezuela violated the fair and equitable treatment, arbitrary measures, and free transfer provisions of the Spain-Venezuela BIT, and awarded US$430.4 million in damages plus interest and costs.
Quantum: US$430.4 million
Applicable law: Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Venezuela (signed 2 November 1995); ICSID Convention; ICSID Arbitration Rules.
Issues in play: The case involved the interaction between the BIT's expropriation, fair and equitable treatment, arbitrary measures, and free transfer provisions, and Venezuela's sovereign regulatory powers, particularly regarding the application of Decree No. 7.394 and other measures affecting the claimants' investments in the food processing sector.
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